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Wednesday, 19 April 2017

Will IP2I get the Commission to deal with Europe'semerging patent troll problem?

For years, there has been concern that the advent of the UPC will bring with it the potential to turn the new European court into an Eastern District of Texas. Two years ago, the AmeriKat reported on the UPC Industry Coalition's website launch and the continued concern that the injunction gap in the UPC would be used as potential sword with which patent trolls would hold to a company's throat to achieve early (and potentially unjust) settlement. However, irrespective of the ultimate fate of the UPC (especially after yesterday's UK snap election announcement), patent trolls, NPEs, PAEs (or whatever it is we are calling them now) are already prowling around Europe, especially given that their original hunting grounds in the US have recently become less hospitable (see Kyle Bass's recent losses, e.g.).

No surprise, that a new industry body called IP2Innovate has recently launched and called for the European Commission to take concrete action to prevent abuses from patent trolls (see their position paper here). IP2Innovate is a coalition of small and large innovative companies, including SAP, Daimler, Intel, Adidas, Google and Spotify, who

IP2Innovate says that they are bringing together policy makers and the legal profession to hear the inside story of abusive patent lawsuits and its effects on innovation in order to work towards a robust, balanced and flexible legal system free from market-skewing patent troll attacks.

Vice President Andrus Ansip(Digital Single Market)

According to their press release, most patent trolls commence patent infringement law suits in Germany (where they benefit from bifurcation) and France (a table of European NPE cases is here). In Germany, patent troll infringement suits apparently account for up to 20% of all patent lawsuits. Such cases include those issued by Marathon against Honywell and Somfy (21 February in Germany) and against Telecom, Vodafone, Telefonica, Google ZTE and Xiamoi Technology (13 February in Germany). Intellectual Ventures also filed against SFR in France last November.

The EPO opposition procedure to knock out bad patents - European patents and unitary patents.

The proliferation of judicial discretion in the UPC Agreement which allows judges to have the discretion to weigh up the interests of parties before granting an injunction.

The CJEU's jurisprudence to prevent all patentees, including SEP holders from abusing injunctions.

The fact that UPC decisions will be publicly accessible.

However, we have seen these reasons before. Readers may recall this (pretty grumpy) AmeriKat post back in 2014 reporting on the response from then Commissioner Barnier (now European chief negotiator for Brexit) to a question from Marc Tarabella, a Belgian MEP, about the problem and the risk of further abuse in the UPC. Two months later Commissioner Barnier responded that they failed to see how the UPC's Union legislation - and therefore not the UPC Agreement which creates the injunction gap problem - "could increase activity of so called 'patent trolls' in Europe." In any event he responded that:

"The UPC Agreement provides for safeguards against ‘patent trolls’. No automatic injunctions shall be granted: the UPC has the discretion to weigh the parties’ interests and to take into account the potential harm from the grant/refusal of the injunction."

Of course, such assurances are not particularly comforting given the Rules of Procedure's emphasis on judicial discretion (and despite statements at conferences that the UPC judges will rarely bifurcate). These issues have been raised previously in several of IPKat posts (see, e.g., AmeriKat post here) and have been enjoyably summarized in the IP2Innovate's video below:

IP2Innovate is therefore urging the European Commission to

"investigate the scale of the problem to better appreciate the risks to business and innovation and take steps to protect European innovators. 80 per cent of lawsuits filed outside the US by patent assertion entities happen in Europe. The majority have been filed in Germany in the past two years."

But, despite the past experience with the Commission's response, Executive Director of IP2Innovate, Patrick Oliver says that that Commission "must get tough with US patent trolls" by way of fee-shifting, proportionality in patent remedies, closing the injunction gap and improving patent quality. IP2Innovate also advocate for wider availability of national patent litigation cases (something the IPKat, Merpel and the AmeriKat has been advocating for years, but we would add the word "free" in there).

But the question is will Europe learn from the US experience and listen? Or will they sit back and watch what happens?

4 comments:

Pro-patent
said...

Interesting debate which leads to the question of to what extent are we going to curtail the patent rights of PAE's and on what grounds? Surely large corporates are only one voice. What about more general public policy considerations to curtailing patent rights? Do we give freedom to operate to anyone developing a useful technology, and somehow work out how to compensate patent owners who lose out? That is an impossibly complex question to address. We cannot simply focus on injunctions and damages as IP2I want us to as that seems discriminatory towards PAE's. Patents are meant to encourage innovation at every level, including those individuals and universities that sell their patent rights to PAE's. By changing laws to decrease the value of patents held by PAE's we are imposing a new regulatory rule that would need to be thought about carefully.

I think the present problems have been caused by the fact that governments have never properly addressed the public policy issues around patents. When should we cut back patent rights? That is potentially an incredibly important matter, and we cannot simply do so at the behest of IP2I which so clearly represents the interests of large corporates

The UPC system has important anti-troll features that the US system does not have.1. Loser pays, so that starting litigation is not risk-free, while in the US the loser only pays in exceptional cases.2. A litigant may have too provide security that he can pay the litigation costs of the other party, so that - unlike in the US - it does not help the troll if the claimant is a special purpose vehicle that only owns the litigated patents.3. No outrageously costly litigation costs, so that defendants don't have the same need as in the US to just settle for any amount that is lower than the expected litigation costs charged by the defendant's own lawyers. 4. No lay juries but expert judges in a specialized patent court.

So, there is no need whatsoever to weaken the UPC litigation system. It should remain possible to adequately protect investments in innovation by means of injunctions imposed on companies that the expert courts has found to infringe valid patents.

The UPC has an extremely important pro-troll feature: the court fee for a counterclaim for revocation of a patent is €20,000. This ridiculously high fee to defend yourself against infringement of a clearly invalid patent does nothing other than facilitate the classic troll behaviour of threatening (UPC) infringement action if a relatively small settlement (perhaps €10,000) isn't paid.

This court fee alone will make the UPC a troll's paradise for extorting money from SMEs. All they need to do is get hold of an overly broad patent. Helpfully, the EPO now seems to be issuing more and more of those:

Kindly note that the UPC fee for a COUNTERclaim for revocation is between EUR 11k and EUR 20k, depending on the value of the case. Especially if the defendant in the infringement case is an SME, it is unlikely that the maximum revocation fee of EUR 20k will have to be paid, because this only occurs if the value of the case exceeds EUR 2 million.

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